Hedge Fund Returns, Kalman Filter, and Errors-in-Variables

摘要

Many studies on hedge fund returns are formulated in a static framework, resorting to a multifactor model using mimicking portfolios or benchmarks accounting for the style of different hedge fond strategies. While classical linear regressions represent a parsimonious approach to the modeling of hedge fond strategies, time-invariant factor loadings might be misleading (Berkelaar, Kobor, and Kouwenberg, The VaR Modeling Handbook, 2009).